Purchase order financing for small businesses can be a great way to get the cash you need to grow your business. It can provide you with the funds you need to purchase inventory, expand operations and more.
In this blog post, we will discuss what purchase order financing is, how it works, its benefits and more. We will also provide tips on how to qualify for this type of financing and what to do if you’re denied.
What is Purchase Order Financing?
Purchase order financing is a type of short-term financing that can be used by businesses to finance the purchase of inventory to fill customer orders. This type of financing is typically used by businesses that have large orders but may not have the cash on hand to pay for the inventory up front.
How Does Purchase Order Financing Work?
There are a few different ways that purchase order financing can work. The most common way is for the lender to pay the supplier directly for 100% of the cost of goods. This means that you will not have to front any of the money for the inventory.
Another way purchase order financing can work is by providing you with a line of credit that you can use to pay for the inventory when it arrives. Once you have sold the inventory, you will then repay the financing company.
What Are the Benefits of Purchase Order Financing?
There are a few different benefits that come with purchase order financing.
Empowers Your business
When you have the financing you need to purchase inventory, it can help you take on larger orders and grow your business. You can also take advantage of opportunities that might be too costly for you to pursue without financing.
Flexible Repayment Terms
One of the great things about purchase order financing is that you repay the financing when you have sold the inventory. This means that you will not have to worry about making payments until your customer pays the invoice.
Grow Without Taking On Debt
Purchase order financing allows you to grow your business without taking on debt. So whether you use this as a way to reduce your debt intake or as a way to free up acceptable debt for other business costs, it can be a great option for your business.
Growth With Bad Or No Credit
One of the best things about purchase order financing is that it can help businesses grow even if they have bad or no credit. This type of financing is based on the strength of your customer placing the order, not your credit score or historical financials.
How Small Businesses Qualify For Purchase Order Financing
In order to qualify for purchase order financing, your business must have a purchase order from a creditworthy customer. Your business must also be able to demonstrate that it has the ability to fulfill the order and deliver the product on time. The lender will also want to see that you have a good relationship with your supplier and that you have a history of making on-time payments.
The lender will then review the purchase order and determine if it is something that they are willing to finance.
How To Apply For Purchase Order Financing
If you think that purchase order financing is right for your business, the first step is to find a lender. You can do this by searching online or talking to other businesses in your industry.
Once you have found a few potential lenders, you will need to gather some information about your business and the purchase order. This includes your business financials, the purchase order, information about your customer and more.
Once you have this information, you will then need to fill out an application. The lender will use this information to determine if you are eligible for financing and how much they are willing to lend you.
What To Do If You’re Denied
If your business is denied for purchase order financing, there are a few things you can do. The first thing you should do is ask the lender why you were denied. This will help you determine what you need to do in order to qualify for financing in the future. You can also try applying for a different type of financing, such as a standard business loan.
Purchase order financing can be a great option for small businesses. It can help you grow your business without taking on debt and it can be used to finance large orders. If you think purchase order financing is right for your business, the first step is to find a lender and fill out an application.
What are your thoughts on purchase order financing? Have you used it for your business? Let us know in the comments below.
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